DUBAI (Zawya Dow Jones), Feb. 9, 2010
The Organization of Petroleum Exporting Countries will call for further compliance before considering any output cut if oil falls below $70 a barrel, a member of Kuwait's Supreme Petroleum Council, or SPC, said Tuesday.
"If oil goes into a sustainable decline below $70 for five to six weeks OPEC will consider cutting but first they will demand compliance," SPC Member Imad Al Atiqi told Zawya Dow Jones in a telephone interview.
Pressure is growing on the cartel to stop a decline in prices ahead of its next scheduled meeting in March. Oil has suffered from fears a global economic recovery could slow as government's withdraw stimulus.
The price of OPEC crude fell to $69.71 at the end of last week, its lowest level in nearly four months, according to data issued by the group on Monday. OPEC's basket price dropped by $3.02 a barrel on Friday, as the dollar rose against the euro for the third day, making it more expensive to buy dollar-denominated crude.
"I don't link the decline with any fundamental reason but due to exchange rates and a strengthening dollar against the euro," Al Atiqi said.
Light, sweet crude futures for March delivery were trading down 6 cents at 0630 GMT at $71.83 a barrel on the New York Mercantile Exchange.
OPEC won't lower production if crude remains in the $70-90 a barrel price range but members with large populations, such as Iran and Nigeria, will find it difficult to maintain their expenditures if the price of OPEC crude falls below this level, Al Atiqi said.
Al Atiqi said Kuwait is complying with its output target but overall OPEC compliance is deteriorating because some members are tempted to sell more oil at a higher price.
"If members find themselves in a comfortable position they will sell more of their oil," Al Atiqi said.
He added that although the movement towards alternative energy is gaining momentum he doesn't feel the world will drop oil as an energy source any time soon.
"As long as oil remains between $70-$90 the world will not desperately look to find alternative oil products," Al Atiqi said.
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